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Networks in the business incubator for creative businesses
The influence of business incubators on startup performance
Ludmilla Rimena
5994438
University of Amsterdam
Master thesis
MSc. Business Administration – Track EMCI
Date of submission: 29-06-2015
Final draft
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stsupervisor: dhr. drs. E. Dirksen
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ndsupervisor: dhr. dr. J.J. Ebbers
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Statement of originality
This document is written by student Ludmilla Rimena, who
declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original
and that no sources others than those mentioned in the text
and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the
supervision of completion of the work, not for the contents.
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Table of content
Abstract p. 4 Introduction p. 5 1. Literature review p. 8 1.1 Entrepreneurship p. 81.2 Social capital theory p. 9
1.2.1 Network structure p. 10
1.2.2 Nature of ties p. 11
1.3 Resource based view p. 13
1.3.1 Financial capital p. 15
1.3.2 Information & advice p. 16
1.4 Business incubator p. 17
1.4.1 Motivations to join BI p. 19
1.5 Creative industries p. 21
2. Method p. 23
2.1 Research method, design and strategy p. 23
2.2 Unit of analysis p. 24
2.2.1 Business incubator organizations p. 24
2.2.2 Startups p. 25
2.3 Data collection p. 26
2.3.1 Business incubator organizations p. 26
2.3.2 Startups p. 27
2.4 Measuring startup performance p. 28
2.5 Data analysis p. 28
2.6 Quality of the research p. 29
3. Results p. 31
3.1 Business incubator organizations p. 31
3.1.1 General service p. 31
3.1.2 BI environment p. 31
3.1.3 BIO network and connections p. 32
3.1.4 Networking opportunities p. 32
3.1.5 Role BIO p. 33
3.2 Startups p. 34
3.2.1 Help from social network p. 34
3.2.2 Motivations to join BI p. 35
3.2.3 Motivations to join chosen BI p. 37
3.2.4 BI environment p. 39
3.2.5 Role BIO for startups p. 39
3.2.6 Linking by BIO p. 41
3.2.7 Networking opportunities p. 41
3.2.8 Participation p. 42
3.2.9 Influence of BIO on network development p. 43
3.2.10 Relationships among tenants p. 44
3.2.11 Collaborations among tenants p. 45
3.2.12 Nature of ties p. 46
3.2.13 Resource based view p. 50
3.2.14 Competition p. 52
3.2.15 Performance p. 53
3.2.16 Influence on startup performance p. 53
4. Discussion and conclusion p. 56
4.1 Summary of findings p. 56
4.2 Discussion and theoretical implications p. 59
4.3 Implications for practice p. 63
4.4 Limitations and recommendations for future research p. 65
References p. 67
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Abstract
Startups in the creative industries have difficulty in creating value, therefore they need a supportive
environment, like business incubators (BIs). Seeing that one of the determining factors for startup success
are an entrepreneurs’ personal contacts, this research will focus on an entrepreneurs’ social network in a BI
for creative businesses (Hausmann, 2010; Elfring & Hulsink, 2003; Davidson & Honig, 2003). Firstly, this
research examines the role of the business incubator organization (BIO) in network development of
startups. Secondly, this research examines the nature of the relationships that arise between tenants in the
BI, specifically strong or weak ties, and which ties give access to information & advice and financial
resources in the BI. Lastly, this research examines if these resources affect startup performance. Five BIs
for creative businesses and nine startups (in those BIs), in Amsterdam, provide empirical data in this
exploratory research. The data reveal that the BIO indeed has a moderating role in the social network
development of an entrepreneur. The majority of the relationships that arise between tenants appear to be
strong ties. However, since most relationships are dependent upon the tenant, weak ties are also found in
the BI. Both ties, strong and weak, give access to information & advice, since there are no barriers in the
BI. In addition, financial resources are only available in the form of payments, through collaborations,
between tenants. These payments indeed add to the revenue of the startup and therefore affect startup
performance, however it’s not enough to guarantee success of the startup.
Keywords: creative industries, business incubator, entrepreneurship, startup, social capital, network
structure, resource based view, financial capital, information, advice, support, performance
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Introduction
The creative industries are one of the fastest-growing economic sectors (Braams & Urlings, 2010) in the
Netherlands, in particular in Amsterdam (Braams & Urlings, 2010), and are characterized by high
uncertainty and high failure rates, due to oversupply of creative individuals and nature of the
products/services (mostly non-utilitarian/hedonic). Still, the top sector creative industries employs the
majority of businesses of all nine key sectors in the Netherlands. In particular, startups are important for
economic development, job creation and innovations (Peters et al., 2004). Nevertheless, startups have
difficulty in creating value, because of their lack of resources, knowledge and social capital.
They face
liabilities of newness (Stinchcombe, 1965 in Bøllingtoft, 2012) and liabilities of smallness (Freeman et al.,
1983 in Bøllingtoft, 2012), which also contribute to the high failure rates and uncertainty that startups face.
Therefore, startups need a supportive environment.
Business incubators (BIs) could provide such a supportive environment for startups in the
creative industries. Although it is not a new concept, the number of BIs for creative businesses, in
Amsterdam, has increased over the years. Recent studies have emphasized the importance of BIs for
startups (Peters et al., 2004; Campbell et al., 1985; Bøllingtoft, 2012; Hackett & Dilts, 2004). Specifically,
it has been argued that BIs support startups with the aim to increase the survival rate of the business (Hackett
& Dilts, 2004). BIs provide a supportive environment by ensuring startups get the resources, services and
assistance they need (Bøllingtoft, 2012). More importantly, BIs and business incubator organizations
(BIOs) give access to a network of experts (Peters et al., 2004; Campbell et al., 1985; Brooks, 1986).
According to Elfring & Hulsink (2003, p. 409), “a network is one of the most powerful assets anyone can
possess”.
In light of this, research, over the last twenty years, has elaborately focused on the impact of
social networks on entrepreneurial outcomes for small en medium-sized firms. Especially, the influence of
social networks on startup performance (Hoang & Antoncic, 2003; Borgatti & Foster, 2003). Although
there has been a lot of network- based research, mainly concerning the content, governance and structure
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of network relationships, researchers, nevertheless, address the need for more network- based research
concerning network development (Hoang & Antoncic, 2003).
Given that entrepreneurs in the creative industries face high failure rates, they must use and
develop their social network. According to research, the greater the environmental uncertainty, the more
likely that entrepreneurs rely on their social network for acquiring competitive advantages (Chen et al.,
2014; Peng & Luo, 2000).
Altogether, it will be interesting to see how social networks among entrepreneurs, in the
creative industries, are constructed in BIs for creative businesses and if these BIs indeed provide a
supportive environment. While most entrepreneurial studies merely focus on the relationship between
social networks and startup performance (Hoang & Antoncic, 2003), this study will also look at the
moderating role of the BIO in the development of an entrepreneurs’ social network. Research has not been
conclusive on whether the assistance provided by the BIO makes a significant difference for startup
performance compared to a similar startup outside of the BI (Hackett and Dilts, 2004). In order to explore
this specific context, this study will answer the following question: What is the role of the business
incubator organization in development of an entrepreneurs’ social network in the business incubator (for
creative industries), and does this affect startup performance?
Since this research involves the exploration of a growing phenomenon within social capital
theory, a qualitative study is conducted, which revolves around three aspects. First of all, this study will
focus on if relationships develop in a BI and the nature of those relationships (weak or strong). Weak ties
create efficient networks that increase the variety of information and are useful in accessing new
information (Burt, 1992 in Kogut, 2000; Uzzi, 1997). On the other hand, strong ties are formed on high
trust, which supports the coordination of information in long-term relationships (Coleman, 1988 in Kogut,
2000; Uzzi, 1997). Since research on network development is limited (Hoang & Antoncic, 2003), in
particular the nature of ties (Elfring & Hulsink, 2000), it is key to determine which ties are optimal, for
entrepreneurs, in order to benefit from their social network.
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Secondly, this study will look at the moderating role of the BIO in the formation of an
entrepreneurs’ social network in the creative industries. During the entrepreneurial process the business
needs of startups change. Therefore, expansion of their social network is necessary to meet their
requirements. The BI and BIO can provide access to a network of experts in order to meet the business
needs of startups (Peters et al., 2004; Campbell et al., 1985; Brooks, 1985).
Thirdly, this study will not link the ties directly to the performance of the startup. Instead it
will focus on certain resources which can be attained through an entrepreneurs’ social network. The
resources discussed in this study are financial resources and information & advice, since both are important
for the survival of a startup (Hoang & Antoncic, 2003; Shane & Cable, 2002).
In order to structure this research, this study will first provide the necessary theoretical
background on the concept of entrepreneurship, social capital and resources. Secondly, this study will link
these concepts to each other and explain why they are relevant for startups. Then, the empirical setting of
this study is explained, by giving a review of the existing research in the field of business incubation. The
qualitative research revolves around a multiple case study, and consists of five interviews with BIOs and
nine interviews with startups in the selected BIs for creative businesses. Following the empirical research,
the results of this study are provided. Next, a summary of the findings, a discussion and the theoretical
implications will be presented. Lastly, this study will conclude with the practical implications, limitations
and recommendations for future research.
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1. Literature review
1.1 Entrepreneurship
To date, entrepreneurship has been studied numerously (Greve, 1995; Bula, 2012). Researchers have argued
that entrepreneurship is important for the economy, with regard to the creation of jobs, productivity growth
and innovation (Van Praag & Versloot, 2007). As a result of numerous studies on entrepreneurship,
multiple definitions have been described. These definitions could be divided in two sides. One side focuses
on the individual characteristics, personality and traits, of the entrepreneur (Hausmann, 2010; Gartner,
1989). For example, individuals with previous business experience are more confident about their ability
to start a new venture. The other side focuses on business activities, on what the entrepreneur does rather
than who he is. For instance, individuals who have the ability to find new business opportunities and collect
the necessary resources, in other words act upon the available possibilities (Hausmann, 2010). Nevertheless,
both sides are missing key elements in defining entrepreneurship. Instead of focusing on each side, the
definition should combine both the person and actions. Indeed, Venkataraman (1997) argues that
entrepreneurship consists of two key phenomena: “the presence of lucrative opportunities and the presence
of enterprising individuals” (Venkataraman, 1997, p 121). Therefore entrepreneurship can be defined as
“how, by whom, and with what effects opportunities to create future goods and services are discovered,
evaluated, and exploited” (Venkataraman, 1997, p 119). Accordingly, “an entrepreneur is someone who
discovers, evaluates, and exploits an opportunity and creates a business to seize it” (Shane & Venkataraman,
2000, p. 218; Greve & Salaff, 2003; Gartner, 1989).
Although the definition of entrepreneurship consists of both person and actions, this research
will concentrate solely on the business actions, since network development is the main focus of this
research. In addition, this research puts a special emphasis on new businesses in the creative industries,
since new businesses lack the resources (both tangible and intangible) to compete effectively (Hughes et
al., 2007). New entry, in the context of entrepreneurship, is the act of launching a new business, by a startup
(Lumpkin & Dess, 1996; Burgelman, 1983). Due to intensive debate on what constitutes a startup, this
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research will define a startup as “a business that exists or has existed for three or less than three years since
the establishment”.
During the entrepreneurial process, entrepreneurs discover business opportunities, obtain
resources, and produce and market goods/services. In other words, launch their own startup and then focus
on daily activities, or exchanges, and on problem solving (Greve & Salaff, 2003). The entrepreneurial
process results in entrepreneurial outcomes, which are critical milestones of consequences of the
entrepreneurial process. Since this study concentrates on entrepreneurs who have established their new
business, the focus will be on startup performance as an entrepreneurial outcome.
Although there has been numerous research in the field of entrepreneurship, research on
entrepreneurship in the creative industries is still limited. Chen et al. (2014) argue that entrepreneurs in
different industries use different criteria to define success. Therefore, it’s particularly important to study
the entrepreneurial process in specific industries. In light of this, this study will focus on startups in the
creative industries and will refer to a startup in the creative industries as a creative startup
1(Chen et al.,
2014).
1.2 Social capital theory
Social networks have increasingly been perceived as a key element of entrepreneurship (Birley, 1985;
Hoang & Antoncic, 2003; Peters et al., 2004; Elfring & Hulsink, 2000; Greve, 1995; Hoskisson, 2011).
Authors agree that one of the determining factors for startup success are personal contacts (Hausmann,
2010; Elfring & Hulsink, 2000; Davidson & Honig, 2003; Stam et al., 2014), since investing in social
relations will create goodwill among members of the social network and those member can be mobilized
for potential benefits (Stam et al., 2014).
In the broadest terms, social networks are defined by “a set of actors (individuals or
businesses) and a set of ties between the actors” (Hoang & Antoncic, 2003, p. 168). By an entrepreneurs’
1NOTE: In the method section, results section, conclusion and discussion section reference to creative startups is also made
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social network is meant direct ties like family, friends, business partners, business contacts, but also indirect
ties. The ties that potentially lead to beneficial outcomes are an entrepreneurs’ social capital and they are a
key component of entrepreneurial networks (Greve & Salaff, 2003; Davidson & Honig, 2003). Social
capital creates value for the startup by giving privileged access to several resources (Stam et al., 2014;
Birley, 1985). Furthermore, social capital positively influences startup performance, seeing that it provides
access to knowledge, power, information and other networks (Stam et al., 2014; Elfring & Hulsink, 2000).
Research on social networks has increased over the years (Stam et al., 2014; Hoang &
Antoncic, 2003). Researchers Hoang & Antoncic (2003), provide an overview of network-based research.
The authors examined and critically reviewed three essential components of network-based research: 1)
content of network relationships, 2) governance and 3) structure (Amit & Zott, 2001).
Firstly, with regard to content of network relationships, interpersonal relationships are seen as
means by which entrepreneurs gain access to various resources held by other actors. The second component
examined, are the distinctive governance mechanisms through which network exchange occurs. Trust
between partners is seen as an important element, which enhances the quality of resource flows, since
partners rely on each other’s fulfillment of the obligation (Larson, 1992; Lorenzoni & Lipparini, 1999 in
Hoang & Antoncic, 2003). The last component is network structure. Hoang & Antoncic (2003, p. 166)
define network structure as “the pattern of direct and indirect ties between actors”. In general, it is proposed
that the position of an entrepreneur in a social network has a critical influence on the resource flows and
therefore on the outcome of the startup (Hoang & Antoncic, 2003). Although the process of network
development consist of all components, this study will solely focus on network structure, as focusing on all
components in this study is too excessive.
1.2.1 Network structure
Traditionally, network research has focused on the implications of network structure for value creation
(Amit & Zott, 2001). As mentioned before, network structure is defined as “the pattern of direct and indirect
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ties between actors” (Hoang & Antoncic, 2003, p. 166). Network structure can be measured by a variety of
measurements (Amit & Zott, 2001). Most commonly used is network size, defined as: “the number of links
between a focal actor and other actors”. (Hoang & Antoncic, 2003, p. 171). The size of the network has a
positive effect on the availability of valuable information for the actors within that network, since network
size increases the amount of information an actor can access (Granovetter, 1973).
Other measurements include density and centrality (Freeman 1979, in Amit & Zott, 2001).
Network density refers to how tightly connected actors in a network are towards each other (Greve, 1995).
While centrality refers to “the ability of actors to reach other actors in their network through intermediaries”
(Hoang & Antoncic, 2003, p. 171). Network centrality and density are important sources of network
advantages, such as timing and referral benefits, because the network consists of direct and indirect ties
who are easily connected to each other (Burt, 1992).
Through network size, density and centrality the amount of resources which actors can access
within their network are measured. Still, there are other patterns within the network structure which
influence actors’ access, not to resources in general, but to a diversity of resources (Hoang & Antoncic,
2003). The extent to which actors gain access to diverse resources is explained by the nature of ties between
actors. Since startup performance is dependent on a variety of resources, this study will focus on the nature
of ties.
1.2.2 Nature of ties
The nature of ties, or strength of ties may vary from either a loose collection of ties (weak ties) to a
close-knit of groups (strong ties). The difference between strong and weak ties can be specified on the basis of
four criteria by Granovetter (1973, p 1361); 1) the frequency of contacts (amount of time), 2) the emotional
intensity of the relationship, 3) the degree of intimacy (mutual confiding), and 4) reciprocal commitments
between the actors involved.
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Accordingly, strong ties are characterized by high trust and bind people into long- term
relationships (Elfring & Hulsink, 2003). These characteristics are comparable to the characteristics that
may be found in relationships between family members or (close) friends (Greve & Salaff, 2003; Elfring
& Hulsink, 2003; Birley, 1985). Strong ties, comparable to family members and (close) friends, may
provide entrepreneurs with useful connections in order to access knowledge and critical resources. Besides,
using the connections given by family members or (close) friends will save search costs and time (Elfring
& Hulsink, 2003). Furthermore, strong ties promote the transfer of fine-grained information, idea
generation, and joint problem-solving (Uzzi, 1997; Coleman, 1988 in Kogut, 2000; Bøllingtoft & Ulhoi,
2005). In addition, Bruderl & Peisendorfer (1998) found that strong ties are of greater importance compared
to weak ties, in relation to business success (measured by business survival), since strong ties increase the
willingness and ability of an entrepreneur’s connections to provide access to necessary resources (Stam et
al., 2014). Especially in the creative industries, which are characterized by high uncertainty, where startups
face the liabilities of newness, entrepreneurs rely on strong ties. Strong ties, like family members and (close)
friends provide them with support (Birley, 1985) to deal with these liabilities and to reduce uncertainty.
However, strong ties have disadvantages as well. Networks with strong ties have the risk of becoming
over-embedded. Thereby, they are more vulnerable to environmental changes and new information is limited or
non-existed (Uzzi, 1997; Coleman, 1988). Due to the transfer of fine-grained information within the
network, entrepreneurs face the risk of receiving limited new information from outside the network, which
is necessary to deal with environmental changes. The people close to entrepreneurs tend to move in the
same circles as them, therefore overlap occurs in previously obtained information (Granovetter, 2005).
Weak ties, on the contrary to strong ties, are loose and non-affective relationships. For
example business contacts who you have infrequent or irregular contact with. Entrepreneurs will contact
them when they have a specific need (Elfring & Hulsink, 2003). Moreover, some researchers suggest that
weak ties are more effective in knowledge sharing since they increase diversity of information and may
provide access to new information (Burt, 1992 in Kogut, 2000; Elfring & Hulsink, 2003). Entrepreneurs
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spent less time with acquaintances compared to family or friends. Acquaintances thus move in different
circles, therefore the information is more diverse (Granovetter, 2005). In addition, weak ties offer
opportunities to meet new people, since they create linkages between people who would otherwise not be
connected to each other in their social network. Weak ties are thus more likely to link members of different
small groups than strong ties, which tend to be concentrated within particular groups (Granovetter, 1973).
Besides, some researchers found that weak ties are positively related to the performance of small businesses,
since they are associated with new people and new information (Stam et al. 2014). Other researchers have
argued that weak ties are more frequent, but less important for the success of the startup than strong ties,
since strong ties facilitate trusted resource exchanges and tacit knowledge transfer. (Uzzi, 1997; Elfring &
Hulsink, 2000). Since entrepreneurs, in the creative industries, have to deal with high failure rates, meeting
new people can give to access to new opportunities (Elfring & Hulsink, 2003).
Nevertheless, Burt (2004) argues that strong and weak ties are not necessarily conflicting, but
rather play different roles for a startup. Different network ties can bring different benefits for startups and
consequently lead to different impacts on the entrepreneurial process (Greve, 1995). Besides, weak ties or
loose relationships may eventually be transformed into strong ties or long-term relationships.
In addition, it should not be overlooked that social networks are not fixed; they evolve over
time (Evald et al., 2006). Depending on the requirement of a startup, an entrepreneur could engage in less
or more social networking. Research shows that entrepreneurs are embedded in ongoing social
relationships, which include both strong and weak ties (Greve, 1995). These relationships are created
through social interactions in which new ties arise or ties evolve.
1.3 Resource based view
While social networks are increasingly perceived as a key element of entrepreneurship, resource
mobilization has already been acknowledged as a key step in the entrepreneurial process (Birley, 1985;
Elfring & Hulsink, 2003). The resource based view (RBV) has been seen as the dominant theory that
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explains inter-firm performance differences (Hoopes et al., 2003; Ireland et al., 2003). A business, or
startup, is a bundle of heterogeneous resources. This means that each startup has his own amount and variety
of resources, which differ from other startups. Therefore firm resource heterogeneity is a source of
competitive advantage (Barney, 1991; Lavie, 2006). Undoubtedly, the best known definition of resources
comes from Barney (1991). He defines resources as all “assets, capabilities, processes, information and
knowledge controlled by the firm enabling it to select and use strategies that enhance organizational
efficiency and effectiveness” (Barney, 1991, p. 101). This definition implies that resources could be either
tangible or intangible.
Research shows that social networks are of great importance in order to get access to crucial
resources (Greve, 1995). Entrepreneurs need to acquire resources in order to launch their startup, perform
well and survive (Elfring & Hulsink, 2000). Especially for startups it’s difficult to mobilize resources in
the early stages of the entrepreneurial process, due to limited financial resources and inability to generate
internal resources (Elfring & Hulsink, 2000; Bøllingtoft & Ulhoi, 2005). Therefore startups, especially
creative startups, rely on their close support network to provide them with resources and stability in the
early stages of the entrepreneurial process. This close support network is used to enter other social networks,
which can give access to other resource providers. In addition, getting access to resources through contacts
by employing social assets like friendship, trust or obligation is cheaper than using market transactions
(Elfring & Hulsink 2000). Besides, certain resources can solely be obtained through social networks.
Startups can attain a variety of resources through their social networks. For example, financial
resources, reputational resources, knowledge, information, advise, expertise, and problem-solving
resources (Hoang & Antoncic, 2003; Birley, 1985; Elfring & Hulsink, 2000) Although most studies focus
on the relationship between entrepreneurs, social networks, resources and growth (Stam et al., 2012; Elfring
& Hulsink, 2000; Greve, 1995), this study will not focus on resources in general, since it’s a rather broad
concept and almost anything can fit Barneys (1991) definition. Therefore, this study will focus on certain
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resources, which may influence startup performance through social networks, namely: financial resources
and information & advice (see Model 1. Research Framework).
1.3.1 Financial capital
Financial capital (tangible resources) includes all financial resources firms can use to develop and grow.
Entrepreneurs are often dependent on financial resources to exploit opportunities, which makes financing
central to the entrepreneurial process (Shane & Cable, 2002). Startups use financial resources to acquire
other important resources, either tangible (e.g. equipment) or intangible (e.g. information & advice).
Startups with greater financial resources can thus invest more in the development of their business and deal
with uncertain environments, like the creative industries. Nevertheless, it’s not easy for startups to attain
financial resources. Lack of financial resources is one of the main reasons that startups fail (Chandler &
Hanks, 1998 in Shane & Cable, 2002). Therefore, financial resources are often sought, by an entrepreneur,
in his own social network, from family, friends or venture capitalists (Ireland et al., 2003).
Moreover, in uncertain environments, like the creative industries, resource holders (e.g.
investors) will seek information that helps them indicate the potential of a startup (Hoang & Antoncic
2003). Since startups lack legitimacy, they need to prove that they possess the capabilities to create value
and competitive advantage (Elfring & Hulsink, 2000; Ireland et al., 2003). Startups will reduce this
perceived risk (lack of legitimacy), by associating themselves with well-established people or
organizations. Positive perceptions about the startup will increase the chances of resource exchange
occurring. An entrepreneurs’ social network can thus influence the amount of financial resources he expects
to obtain (Sirmon & Hitt, 2003, in Ireland et al., 2003).
Furthermore, according to research, the nature of ties (strong or weak) influences the ease of
obtaining resources, including financial resources. Research shows that strong ties provide an advantage in
accessing financial resources trough others in uncertain environments, since strong ties are characterized
(among other things) by social obligation and access to private information (Podolny, 1994 in Shane en
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Cable, 2002). Actors are therefore motivated to behave generously towards one another, they know what
to expect from each other and there is mutual gain (Uzzi, 1996). Weak ties, on the contrary are characterized
by self-interest (Granovetter, 1985). Thus, in the absence of strong ties, startups are more likely to engage
in a business transaction which is characterized by interest. While in the presence of strong ties,
self-interest shifts to mutual gain (Uzzi, 1996).
1.3.2 Information & Advice
First, in this study information is defined as “facts provided or learned about something or someone”
(Oxford Dictionary). Hoang & Antoncic (2003) argue that a key benefit of networks for the entrepreneurial
process is the reliance they provide for business information & advice (intangible resources). Authors agree
that social relations give access to information (Lechner & Dowling, 2003; Elfring & Hulsink, 2000; Birley,
1985; Davidson & Honig, 2003). More specifically, startups use their social network to get information
about markets and customers (Elfring & Hulsink, 2000), to get ideas, to gather reassurance and information
to recognize opportunities (Birley, 1985). Moreover, startups will ask for information from others close to
them or people they have dealt with in the past, because this information is cheap and often trustworthy
(Granovetter, 1985). In addition, ties to numerous people and businesses could be relevant to access new
and know-how information (Hoang & Antoncic, 2003).
Secondly, advice is defined in this study as “an opinion or recommendation offered as
a guidance” (Oxford Dictionary). Entrepreneurs rely on their social networks for advice, they often seek
advice from family, friends or close business partners on their ideas about the startup and advice to
recognize entrepreneurial opportunities (Birley, 1985). Moreover, since entrepreneurs face the liabilities of
newness, assistance from professional experts is also needed (Konrad, 2013; Hager et al., 2004).
As mentioned in the previous chapter, strong ties promote the transfer of fine-grained
information, idea generation, and joint problem-solving (Uzzi, 1997; Coleman, 1988 in Kogut, 2000;
Bøllingtoft & Ulhoi, 2005). However, networks with strong ties have the risk of becoming over-embedded,
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and therefore the risk of receiving limited new information (Granovetter, 2005). Weak ties, on the contrary,
increase diversity of information and may provide access to new information (Burt, 1992 in Kogut, 2000;
Elfring & Hulsink, 2003).
Model 1. Research Framework
1.4 Business incubator
As mentioned before, BIs could provide creative startups with a supportive environment. Hence, the
number of BIs for creative businesses, in Amsterdam, has grown in the recent years (see appendices Graph.
1.). Vacant buildings and new building are effectively (re-)used to accommodate small and medium-size
creative businesses in order for them to develop successfully (Municipality of Amsterdam, 2014).
Consequently, more research has focused on BIs in general (Bøllingtoft & Ulhoi, 2005;
Hackett & Dilts, 2004). The function of the BI in the entrepreneurial process has changed from being merely
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a business center with office facilities, to one offering training, networking and consulting for startups
(Peters et al., 2007). In light of this, a more detailed look at what this phenomenon actually is and how it
can create value for creative startups is required.
Due to the fragmented research base on BIs, no commonly-accepted definition of business
incubation has been adopted (Hackett & Dilts, 2004; Hughes et al., 2007). The term BI is repeatedly used
to characterize a wide range of organizations that somehow help entrepreneurs during the entrepreneurial
process. Consequently, a variety of classifications for BIs can be found in research, for example, ‘business
accelerators’, ‘networked BIs’ (Hansen et al., 2000), ‘knowledge parks’ and ‘seedbeds’ (Bøllingtoft &
Ulhoi, 2005; Bøllingtoft, 2012). This research will focus on a specific type of BI, called ‘creatieve
broedplekken’ in Dutch, since they are solely intended for creative businesses. These ‘creatieve
broedplekken’ could be literally translated as ‘creative breeding grounds’ in English. Similar to other BIs,
no commonly-accepted definition of these so called ‘creatieve broedplekken’ exists, in the Netherlands.
Several researchers characterize BIs as institutions that link people, skills, resources, capital
and knowledge to leverage entrepreneurial talent and accelerate a firm’s development (Hansen et al., 2000).
This widely accepted view suggests that the mere presence of a business in a BI ensures its success and
implies that startups merely need to interact in order to create value and increase performance. Therefore,
researchers have often focused on BIs as creators of value. Nevertheless, more recent studies focus on
networking as a process. Startups located in a BI will create value by being embedded in a social network
that provides access to powerful connections. The BI thus only offers opportunities for value creation. The
extent to which value is created and success is achieved, depends on the extent to which startups exploit
these opportunities (Hansen et al., 2000). This new incubator model is known as the “networked incubator”
(Hansen et al., 2000; Bøllingtoft & Ulhoi, 2005).
According to Hansen et al. (2000, p 76) “the distinguishing feature of a networked incubator
is its ability to foster partnerships among startup teams”, thus facilitating the flow of knowledge and talent
across companies and forging relationships between them. Moreover, Bøllingtoft & Ulhoi (2005, p. 265)
19
complement this by pointing out synergies and relationships under one roof. They refer to a networked
incubator as “a hybrid form of the archetypal BI”.
Since this research examines the role of the BIO in the development of networks, this study
will adopt the definition by Allen & McCluskey (1990, op. 62). The authors refer to the BIO in their
definition. Allen & McCluskey (1990) define BIs as “organizations that serve as an intervention
mechanism seeking to successfully assist entrepreneurial firms in the formation, growth, and development
of the venture”. BIOs can provide a link between startups and their environment by facilitating network
development. (Peters et al., 2004; Hansen et al., 2000). However, research also suggests that relationships
between BIOs and tenants are often infrequent and active facilitation by BIOs rarely occurs (Honig &
Karlsson, 2007, in Ebbers, 2013).
1.4.1 Motivations to join BI
As mentioned before, entrepreneurs are embedded in ongoing social relationships. Entrepreneurs possess
connections prior to becoming a tenant in a BI. However, this study will not focus on the social relationships
that already exist, but rather will focus on the BIs ‘social network and the networking activities within the
BI to determine how startups use these networking opportunities. Given the newness, smallness, and weak
legitimacy (Bøllingtoft & Ulhoi, 2005) of creative startups, they are more likely to make use of the BIs’
network than develop external connections (Ireland et al., 2003). The BIOs’ network is constructed and
made available to each tenant. Drawing from the incubators network will save considerable time and search
costs (Hughes et al., 2007).
In addition, BIs try to recognize the failures of the market, namely information costs, lack of
services and assistance, and financing. Certain BIs have been established to support startups by providing
them with the resources, assistance and services they need (Bøllingtoft, 2012). These forms of support may
stimulate the growth and success of startups, consequently leading to the creation of jobs and acceleration
of regional economic development (Peters et al., 2004).
20
One of the first studies on BIs, by Brooks (1986), describes the following characteristics of a
BI; 1) flexible leases, 2) shared services to reduce overhead costs, 3) access to a network of experts, and 4)
access to or assistance in mobilizing resources (including financing). In addition, other scholars emphasize
the importance of affordable rents (Campbell, 1989; Peters et al., 2004; Hackett & Dilts, 2004), the help in
obtaining legitimacy (Bøllingtoft & Ulhoi, 2005), and an environment with other startups which could lead
to social inputs, collaboration (Hughes et al., 2007), sharing of contacts and psychological support
(Bøllingtoft & Ulhoi, 2005; Brooks, 1986).
One of the core components of the supportive environment of a BI are the shared facilities
and services (Bøllingtoft, 2012). For example, shared equipment and general services like an office
reception, administrative services, equipment services, and conference rooms (Peters et al., 2004; Hackett
& Dilts, 2004; Bøllingtoft & Ulhoi, 2005). Another core component consists of the access to a network of
experts which the BI provides. Startups, for example, get the opportunity to discuss general business matters
and in some cases venture capital. (Peters et al., 2004; Campbell et al., 1985; Brooks, 1986).
Apart from all these services, the opportunity for networking is one of the most critical service
offered by a BI (Bøllingtoft, 2012; Bøllingtoft & Ulhoi, 2005). By actively making use of networking
opportunities and expanding their social network, startups increase their chances on competitive advantage
(Ireland et al., 2003). BIOs can help startups get access to business networks (Bøllingtoft, 2012). Moreover,
since all these businesses are under one roof, either in separate or shared office spaces, the BI provides
opportunity for direct communication. Besides, it makes collaboration between tenants more likely.
Collaborations could create value for both businesses involved by giving access to a variety of resources,
knowledge and opportunities. In addition, in collaborations, the costs and risks are shared among the
businesses (Ireland et al. 2003).
In a BI, either strong or weak ties could emerge from the interactions between tenants
(Bøllingtoft & Ulhoi, 2005). Most of the relationships in BIs appear to be informal, since these relationships
are not based on contractual relationships, but on trust (Lyons, 2000, in Bøllingtoft, 2012). Moreover,
21
entrepreneurs in BIs mainly rely on their informal contracts, therefore formal contacts are hardly used in
the BI. However, for BIOs it’s easier to arrange a formal network compared to an informal network, since
entrepreneurs often rely on their informal contacts, like family and friends (Brooks, 2000, in Bøllingtoft,
2012). Nevertheless, according to research an informal environment increases the likelihood that informal
relationships will arise (Lyons, 2000, in Bøllingtoft, 2012).
In addition, startups under one roof have the aspect of new in common which could create an
initial bond. Furthermore, when startups are close to each other and the communication between them is
frequent and intense, there is greater potential for friendship-like relationships or strong ties to emerge
(Granovetter, 1973). These friendship-like relationships or strong ties will decrease barriers to ask other
tenants for information, advice, and ideas. Also, in terms of social networks, the barriers for access to other
networks are decreased, which potentially could provide access to other resources.
However, while there are benefits for startups to become a tenant, there might be risks
associated with it as well. Granovetter (1985) argues that working closely together creates a risk of cheating,
in other words, tenants that steal each other ideas. Nonetheless, economists have pointed out that one
incentive not to cheat is the cost of damage to one’s reputation. Since startups lack legitimacy, this will be
not an issue in the BI. In addition, the view that businesses should be seen as individual, autonomous entities
that compete against a growing number of rivals has become outdated. Because startups lack the resources
(both tangible and intangible) to compete effectively, they suffer from interrupted development. Therefore,
collaboration between tenants increases exposure for startups. As startups work together an exchange of
resources occurs and they can achieve more together than they could alone. This will give startups the
opportunity to create value and increase performance (Hughes et al., 2007).
1.5 Creative industries
Creativity plays a central role in stimulating economic growth in cities, regions, and advanced capitalist
economies in general (Stam et al., 2008, p. 119). Especially in the Netherlands, which has one of the highest
22
concentrations of creative class (Florida, 2003) in the world, the creative industries are of great importance.
The strongest concentration may be found in the Randstad, the west wing of the Netherlands, including the
metropolitan area of Amsterdam (Stam et al., 2008).
The creative industries can be defined as ‘industries that supply goods and services that we
broadly associate with cultural, artistic, or simply entertainment value’ (Caves, 2000, p. 1). The creative
industries include a variety of businesses such as design, media, fashion, software, games, architecture,
filming, music, photography and performing arts (Chen et al., 2014; Chaston & Sadler-Smith, 2012; Caves,
2000). Goods and services are not merely produced to create economic value. They also communicate
artistic, symbolic and non-utilitarian value. Therefore, the creative industries play a significant role in the
development and maintenance of lifestyles and cultural identities in society (Stam et al., 2008).
As mentioned in the introduction of this research, in the Netherlands, the top sector creative
industries employs the majority of businesses of all nine key sectors (10 % of all Dutch Businesses) in the
Netherlands. The creative sector includes 130.550 people and more than 40.000 businesses (CBS Monitor
2013). Of these businesses, more than half is established in Amsterdam. Moreover, they are generally small
(47%) (Braams & Urlings, 2010), most likely due to the nature of the work, which is labor-intensive, and
because economies of scale are difficult to achieve in the creative industries (Canoy et al., 2005, in Stam et
al., 2008). These businesses are usually run and managed by their founder(s) (Konrad, 2013; Stam et al.,
2008).
Since 2013 the Dutch government has reduced subsidies for the creative sector. For this reason
the financial stability of many cultural businesses has decreased. To cope with these losses, creative
businesses need to seek funding elsewhere. Therefore, the Dutch government has redesigned its cultural
policy, now focusing on stimulating cultural entrepreneurship (Press release Rijksoverheid, 2012).
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2. Method
Within this section, first the chosen research method, design and strategy will be explained. Then, the unit
of analysis, the sample and the process of data collection is described. Next, the measurement of
performance will be explained and the data analysis will be outlined. Lastly, the quality of the research will
be considered, using the specific criteria of qualitative research.
2.1 Research method, design and strategy
The aim of this exploratory study is to gain in-depth understanding of a phenomenon, namely creative
startups in BIs for creative businesses, focused specifically on network development. Despite the widely
acknowledged importance of the creative industries for economic growth, innovation and job creation
(Peters et al., 2004), a shortage exists, in research, in the field of entrepreneurship and network theory
centered in the creative industries. In addition, theoretical grounding with regard to BIs in the context of
the creative industries is relatively undeveloped. Therefore, an exploratory research provides opportunities
for gaining new insights on the subject and the possibility for adaptation during the research (Saunders et
al., 2009). Especially knowledge about the role of the BIO in network development as well as if the
relationships in the BIs for creative businesses affect startup performance is relevant for this research.
The study will use qualitative research to collect data on the motives of creative startups to
join BIs, the development of their social networks and the role of the BIO in this process and eventually if
this affects startup performance. In order to collect qualitative data, the interview method will be used since
it allows for obtaining more specific and in-depth information and a rich understanding compared to
quantitative research methods due to the real life setting (Yin, 2009). Nevertheless, a disadvantage of this
approach is the small sample size, as a result of which generalizability is limited (Saunders et al., 2009).
The data gathered from interviews has the potential to contribute to theory building and ideas
about business incubation. Thus, an inductive research approach is used, since the approach allows for the
development of understanding of the nature of the role of the BIO and motivations of creative startups to
24
become a tenant in a BI, the relationships that arise and the importance of those relationships for startup
performance. Moreover, this approach permits new and emerging themes to be taken in account while the
research progresses.
The research will employ a multiple case study methodology. The case study method enables
this study to attain a detailed understanding of the context, startups in BIs, and the activity taking place
within the context, namely network development. Using multiple cases allows for comparing cases and
increases the likelihood of new theory building (Eisenhardt, 1989). Both BIOs as well as creative startups
within BIs will be the unit of analysis.
2.2 Unit of analysis
2.2.1 Business incubator organizations
The research area of this study is Amsterdam. Therefore, BIs were selected according to their location.
From the year 2000, there are an estimate of 60 BIs in Amsterdam, which accounts for 140.000m² of space.
These so called ‘creative broedplekken’ offer office spaces to entrepreneurs in the creative industries, which
accordingly was the first criterion for the selection. Estimated 3000-4000 entrepreneurs in the creative
industries make use of the spaces in BIs, which are generally set up by foundations and thus are non-profit
organizations (Municipality of Amsterdam, Bureau Broedplaatsen)
The second criterion for the selection was based on the size of the BIs. Each chosen BI had to
have more than 500m² of space available, otherwise there would only be a small number of tenants. Still,
there is a variation between the BIs. Whereas the smallest BI has 855m² of space available, the largest has
24000m² of space.
The final BI population consisted of five BIs for creative businesses (see Table 1.). The
interviews were conducted with the director or manager of the BI, who is responsible for the day to day
activity in the BI and is in contact with the tenants and therefore the creative startups (see Table 2.).
25
Table 1. Business incubators
* small= 0-25 offices - medium= 25-50 offices - large= 50-100 offices ** FTE = Fulltime employee
Table 2. Business incubators and the functions of the respondents (the number given to each BI is randomly
assigned and does not correspond with Table. 1.) Business
incubator
organization Respondent BIO1 Director BIO2 General manager BIO3 Director/Founder BIO4 Office manager BIO5 Director
2.2.2 Startups
This research focusses on startups, therefore the first criterion for the selection was the age of the business.
Businesses that exist or had existed for three or less than three years since the establishment were included
in the research. The research area of the startups consisted of the selected BIs for creative businesses. Since
there was difficulty in finding enough respondents who would fit the first criterion, businesses that exist or
had existed for five or less than five years since the establishment, were also included in the research. The
second criterion for the selection of the startups was the nature of their business, creative (part of the creative
industries).
The final startup population consisted of 9 creative startups (see Table 3.). The interviews
were conducted with the founder or one of the founders.
Business incubator Organization Stadsdeel Size Spaces Size*
Creative industries
Employees at BI
Old School
Stichting Old School
Amsterdam Zuid 1000m2 15 S Yes 2 FTE**
ALab
Gemeente Amsterdam
(since 02-2015) Noord 5000m2 33 M Yes 2,5 FTE
Cinetol Stichting Cinetol Zuid 855m2 12 S Yes 3 FTE
Volkskrantgebouw
Urban Resort
Foundation Oost 3200m2 84 L Yes 1 FTE
Loods 6
Stichting Kunstwerk Loods 6
Oostelijke
26 Table 3. Startups Startup Launch (year) Founder Creative
industries Startup Space
Business incubator
One More First More Own Shared Which
Time in business incubator S1 2015 X X X X B1 1/4 year S2 2013 X X X X B2 8 year S3 2010* X X X X B3 3/4 year S4 2014 X X X X B4 1 1/2 year S5 2013 X X X X B4 1 1/2 year S6 2013 X X X X B4 1 1/4 year S7 2014 X X X X B2 1 1/4 year S8 2012 X X X X B4 1 year S9 2012 X X X X B3 1/4 year
* According to the definition of a startup in this research, respondent S3 is not a startup anymore
2.3 Data collection
2.3.1 Business incubator organizations
The data for this research was collected by approaching several BIOs in Amsterdam. First, BIs who were
publicly known, were contacted by email. Secondly, a list of BIs, provided by the municipality of
Amsterdam, was used to contact even more BIOs. In the email, it was mentioned that intention of this
research was to interview both BIOs, as well as tenants of the BIs. In the end, 15 BIOs were contacted, of
which nine responded. Six BIOs didn’t respond at all. One BIO responded and mentioned that they thought
they didn’t fit the research profile and therefore would not participate in this research. Two other BIs said
they get a lot of requests for research projects and unfortunately didn’t have time for another research
project.
So, between February and May 2015, 6 interviews with the organizations responsible for the
BIs were conducted. One interview was dropped from the research, since it didn’t fit the necessary criteria
(lack of creative businesses), leaving a total of 5 interviews. The interviews were conducted at the BIs, in
an office, meeting room, lobby or café.
27
2.3.2 Startups
Following the interviews with the BIOs, creative startups in the selected BIs were approached. Since there
was no knowledge of which businesses in the BIs were startups and which were not, various businesses
were contacted by email. The email addresses of the businesses were collected by searching on the internet
and the chamber of commerce, using the address of the BI. Each email was personally directed at the
founder of the business. In the email, it was mentioned that interviews with BIOs had previously been
conducted. In addition, the criteria that startups had to meet (see previous section) were indicated. In the
end, around 150 businesses were contacted, of which 28 responded. The rest of the businesses didn’t
respond at all (not even after sending a reminder). Five businesses responded and indicated that they didn’t
fit the criteria and therefore would not participate in my research. Thirteen other businesses indicated that
they were too busy and unfortunately didn’t have time for an interview.
Finally, in May and June 2015, 10 interviews with startups were conducted. One interview
was dropped from the research, since the business didn’t fit one of the criteria (it was established in 1995),
leaving a total of 9 interviews with creative startups. The majority of the interviews were conducted at the
BIs or in a café. One interview was filled in by the respondent at home, due to a busy work schedule.
For both the interviews with the BIOs and creative startups an interview protocol was used.
The interviews were semi-structured, the questions were derived from the theoretical framework. The
structure of the interview gave the opportunity to ask additional questions during the interviews which were
relevant to answer the research question (Leech, 2002). When interesting topics came up, questions were
derived in order to discuss those topics. Most of the questions were open-questions, which gave the
respondents the opportunity to give elaborate answers. However, during the interviews several questions
were dropped, because of their irrelevance to answer the research question.
The interview protocol of the BIOs consisted of 17 structured questions (apart from general questions). The
interviews took between 35 and 55 minutes. The interview protocol of the creative startups consisted of 32
structured questions (apart from general questions). The interviews took between 25 and 50 minutes.
28
At the beginning of each interview, the respondents signed a consent form, in which they
confirmed their understanding of the research, their voluntary participating and agreement to anonymous
quotations in the research. Moreover, the respondents agreed to the recording of the interview. Therefore,
each interview could be transcribed by listening to the recording. The transcripts can be found in the
appendices.
2.4 Measuring startup performance
As mentioned before, the entrepreneurial process results in entrepreneurial outcomes. This research focuses
on the performance of the startup. In order to get insight in the performance of the startups, respondents
(creative startups) were asked to classify the performance of their startup, using the classification system
by Peña (2002). Peña (2002) describes four classifications: 1) Failure, the entrepreneur decides to terminate
the business due to bad results. 2) Decline, despite of poor results, the entrepreneur still has expectations
for better results and continues with the business. 3) Stability, the results are steady and remain unchanged
over time. 4) Growth, the results are sufficient to meet expectations and there are opportunities for greater
results. Results are based on the revenue of the business. Besides, failure and decline are viewed as negative
performance, while stability and growth are viewed as positive performance.
2.5 Data analysis
After gathering the data, it was analyzed by thorough examination of the interview transcripts.
The coding of
transcripts was first done by hand, using color markers. Themes were derived from the theory and the
questions asked during the interview. In addition to coding the transcripts by hand, the qualitative coding
software Nvivo (2014) was used to further analyze the data. Codes were removed, added and refined while
analyzing the data. Once the analysis was finished, the data was organized and displayed in tables.
29
2.6 Quality of the research
The strength of the study is the in-depth character which gives the opportunity to get a rich understanding
of the research subject, which can give useful insights and can lead to further research directions (Yin,
2009). To ensure the quality of this research, four research measures will be evaluated: credibility,
transferability, dependability and confirmability.
This study will ensure credibility by using a clear conceptual framework. Construct validity
will be insured by using multiple sources of evidence, multiple cases of both BIs and startups for data
collection (Yin, 2009). Credibility is enhanced by different forms of triangulation.
Triangulation
“refers to
the use of different data collection techniques within one study in order to
ensure that the data are telling you
what you think they are telling you” (Saunders et
al., 2009, p. 146).
Firstly, source triangulation by
interviewing both BIOs and startups. Secondly, location triangulation by including by gathering data from
BIs on various locations in Amsterdam. Moreover, since the sources are for most responsible for the
management of BI and personal contact with the tenants, they are the most reliable with regard to their role.
In addition, the respondents of the creative startups are the founders of the startups. Since they are involved
with the entrepreneurial process and the management of the startup at this point in time, they are
knowledgeable about the startup, which makes them the most reliable source for this research.
To ensure transferability, this section provides a detailed picture of the research context. This
is important in assessing the generalizability since the research approach is qualitative and the size of the
research sample is relatively small. Nonetheless, this research can be a starting point for theory building,
since it allows for generating new theory (Eisenhardt, 1989).
To ensure dependability, in this section an audit trial is provided, which is open to external
scrutiny. Through the transparent description of the data, methods and decisions about the research, the
research can be replicated at another time. Moreover, to ensure reliability of the data collection an interview
protocol will be used with each case (Yin, 2009).
30
As mentioned before, triangulation is used to ensure credibility. Triangulation further
contributes to ensure confirmability. By including different BIs, the role of the BIO can be examined from
different points of view, in order to present a detailed description of the situation.
31
3. Results
The results of the interviews, of both the BIOs and creative startups will be organized according to the
theoretical framework. First, the results from interviews with the BIs will be presented. Then, the results of
the interviews with the creative startups. In addition, the tables will provide summaries of the results.
3.1 Business incubators
This section will look into the role of the BIO in the network development of a creative startup. Within
research, it is argued that BIOs can provide a link between startups and their environment (Peters et al.,
2004). In this section the following themes will be discussed: general service, BI environment, BIO network
and connections, collaboration, networking opportunities and most importantly role BIO. In addition,
Table. 4 provides a summary of the discussed themes.
3.1.1 General service
When entering each BI, it was noticed that only one BI, BIO3, had a reception, which makes the BIO easily
approachable for tenants, but also clients who are visiting the BI. BIO3 mentioned that “they want personal
contact with the tenants to create a sort of community feeling”. Therefore, they make sure that there’s
always somebody at reception. BIO1 and BIO5 indicated that the reason they don’t have a reception is due
to budget limitations. If they would create a reception, the tenants would have to pay for the costs. Since
there is no demand from the tenants, they see no reason to create a reception. The other BI’s use their offices
as a reception. Still, only the door of BIO4 office is always open.
3.1.2 BI environment
During the interviews, the BIOs were asked how the atmosphere is in the BI, how the interaction is between
the BIO and tenants, and how the interaction is between tenants, all the respondents answered that it is
32
